PNOC-EDC advisors dangle financing facility to sweeten bidding package

The financial advisors for the sale of the government-owned majority stake in Philippine National Oil Co.-Energy Development Corp. (PNOC-EDC) are working out a staple financing facility for the prospective bidders.

The Development Bank of the Philippines (DBP) and ING Bank said they are arranging a staple financial scheme which, they said, is “becoming a common international practice.”

The DBP said since such financing for an acquisition is already in place, it allows the seller to launch an expedited bidding process and receive more timely bids.

“Buyers also benefit because they take comfort that the requisite financial backing is already in place,” the DBP said in a statement.

The sale of the 60 percent stake in PNOC-EDC has been attracting a large number of foreign and domestic energy players.

The equity stake is an attractive investment since PNOC-EDC is the country’s largest geothermal power source and one of the most profitable government entities.

PNOC president and chairman of the PNOC Privatization Committee Antonio Cailao said they have already received several bid offers. Among the interested bidders include Aboitiz Power Corp., Ashmore Group, Alsons Consolidated Resources, Avenue Capital Group, Filinvest Development Corp., First Gen Corp., Geyser Green Energy, International Power, One Energy Ltd. Reykjavik Energy, San Miguel Energy Corp., Marubeni Corp., and Sumitomo Corp.

“Most of the bidding groups have already hired their own financial advisors, legal, technical, and accounting consultants for this important endeavor,” Cailao said. “In addition, a lot of the issues and queries of the bidding groups have been addressed and are in the process of being resolved.”

PNOC-EDC is selling 60 percent of its equity as part of efforts to trim down the National Government’s fiscal deficit. The 60-percent stake is estimated to be worth about P38 billion.

Earlier, the International Finance Corp. (IFC), the private sector investment arm of the World Bank Group, had likewise expressed willingness to raise funds or to tap funds for investments made in the energy, infrastructure and utilities sector.

The price of PNOC-EDC shares traded at the local bourse has consistently improved since government’s announcement to dispose its remaining shareholding in the company.

“The proceeds could go up to as high as P50 billion. This is the reason behind the keen interest of the banking community in the PNOC-EDC privatization. Banks may be able to provide some of the money to the winning bidder to close the deal,” industry sources said.